States may require Medicaid applicants holding U.S. savings bonds to request a waiver allowing them to cash out the bonds early, thus converting them to available resources, the Centers for Medicare and Medicaid Services (CMS) states in a memorandum to its Region I (Boston) administrator.
The memorandum (dated February 2, 2004) was responding to questions raised by Vermont and forwarded by the regional administrator. Vermont had asked whether Medicaid applicants or recipients could permanently or indefinitely exempt liquid assets, regardless of value, by converting them to U.S. savings bonds and then "rolling over" or "renewing" the bonds during the minimum retention period.
The reply, from Glenn A. Stanton, acting director of CMS's Disabled and Elderly Health Programs Group, notes that states may implement eligibility rules to limit this practice, and reports that after consultation with the Bureau of Public Debt, CMS has determined that there is no way to "roll over" or "renew" U.S. savings bonds in order to prolong the period that owners of bonds must hold them before the bonds are eligible for redemption (the minimum retention period).
But the memorandum goes on to address the possibility of forcing Medicaid recipients to waive the minimum retention period altogether. According to Social Security Administration's Medicaid eligibility rules, which Vermont must follow, savings bonds are not countable as resources during the minimum retention period. Last year, the Treasury Department increased the minimum retention period for Series EE and I Savings Bonds from 6 months to 12 months for bonds purchased on or after February 1, 2003.
The memorandum notes that bondholders may request a hardship exemption from the minimum retention period, and that an individual requiring the funds for nursing home care "might very well constitute the kind of hardship Treasury envisions as a reason to make a refund." The memorandum then states that "[r]equiring an individual to request a waiver of the minimum retention period for savings bonds furthers the purpose of Title XIX of the Social Security Act . . ."
"[A]fter the Treasury has determined that it will waive the mandatory retention period," Stanton writes, "states may either require a bondholder to redeem the bond as a condition of eligibility, or count the redemption value of the bond as a resource."
However, until Treasury rules on the request for early redemption, the bonds are not countable as a resource. If Treasury declines to grant a hardship waiver, the bond would not be counted until the expiration of the mandatory retention period.
To download the full text of the CMS memorandum, click on: https://www.elderlawanswers.com/resources/documents/CMS Center for Medicaid and State Ops All.pdf
Our thanks to Southfield, Michigan, ElderLawAnswers member Jim Schuster for bringing this memorandum to our attention.
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